Using Primary and Secondary Market Movements to Construct an Optimal Time-Series Momentum Strategy : A Replication Study
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Original versionYusuf, N.M. & Samir, H. (2021) Using Primary and Secondary Market Movements to Construct an Optimal Time-Series Momentum Strategy : A Replication Study (Master's thesis). University of Agder, Kristiansand.
Time series momentum (TSM) strategies is a topic that has been analyzed in numerous academic journals; often the results of the studies imply that TSM outperforms the benchmark (buy-and-hold strategy). Nevertheless, most of the research covers primary trends as proposed by the Dow Theory. We implement a new TSM strategy that in addition to the primary trends, also considers the secondary trends in the Dow Theory. This TSM strategy is then applied to various look-back periods(speed), including predetermined static speeds, and dynamic speeds. The latter in which we use back-testing to find optimal speeds for different market states (bull, bear, correction, and rebound), and implement the speeds in subsequent periods with forward-testing. The TSM strategies are applied on international market indices, and the Sharpe ratio for each strategy reveals that the dynamic speed strategies dominate in terms of performance.
Master's thesis in Business administration (BE501)